CMS pre­scribes pay­ment fix to re­sus­ci­tate US an­tibi­ot­ic in­dus­try

As the UK ex­per­i­ments with a sub­scrip­tion-style pay­ment sys­tem to re­sus­ci­tate the fledg­ling an­tibi­ot­ic in­dus­try — in the Unit­ed States, the Cen­ters for Medicare & Med­ic­aid Ser­vices (CMS) is work­ing on re­struc­tur­ing the pay­ment ap­pa­ra­tus for new an­tibi­otics to re­vi­tal­ize an­timi­cro­bial de­vel­op­ment and res­cue ex­ist­ing man­u­fac­tur­ers.

For one of the biggest threats to glob­al health, the li­on’s share of an­tibi­ot­ic de­vel­op­ment is tak­ing place in a hand­ful of labs of small bio­phar­ma com­pa­nies as a ma­jor­i­ty of their larg­er coun­ter­parts fo­cus on more lu­cra­tive en­deav­ors. In re­cent months, a hand­ful of an­tibi­ot­ic de­vel­op­ers — in­clud­ing Achao­gen and Tetraphase — have seen their val­ue go up in smoke as fee­ble sales frus­trate growth.

It is no se­cret that the in­dus­try play­ers con­tribut­ing to the ar­se­nal of an­timi­cro­bials are fast dwin­dling. Drug­mak­ers are en­ticed by green­er pas­tures, com­pared to the long, ar­du­ous and ex­pen­sive path to an­tibi­ot­ic ap­proval that of­fers lit­tle fi­nan­cial gain as treat­ments must be priced cheap­ly, and of­ten lose po­ten­cy over time as mi­crobes grow re­sis­tant to them. Con­se­quent­ly, there have been no new class of an­tibi­otics ap­proved since the 1980s — and to­day, rough­ly 700,000 deaths an­nu­al­ly are at­trib­uted to drug-re­sis­tant bac­te­ria, ac­cord­ing to the WHO.

Medicare ben­e­fi­cia­ries ac­count for the ma­jor­i­ty of both new an­timi­cro­bial re­sis­tance (AMR) cas­es and fa­tal­i­ties in the Unit­ed States, CMS ad­min­is­tra­tor Seema Ver­ma not­ed in the jour­nal Health Af­fairs on Fri­day.

In the Unit­ed States, in­cen­tives are al­ready in place to push drug­mak­ers to de­vel­op an­tibi­otics, such as fund­ing sup­port through the Bio­med­ical Ad­vanced Re­search and De­vel­op­ment Au­thor­i­ty (BAR­DA) and reg­u­la­to­ry re­forms such as the Lim­it­ed Pop­u­la­tion Path­way for An­tibac­te­r­i­al and An­ti­fun­gal Drugs (LPAD)  — but the in­dus­try is clam­or­ing for the pas­sage of “pull in­cen­tives,” or pol­i­cy mea­sures to in­crease the val­ue of a mar­ket­ed an­tibi­ot­ic by re­ward­ing drug­mak­ers on­ly af­ter their an­tibi­ot­ic is ap­proved.

Ex­ist­ing in­cen­tives, “while well-in­ten­tioned…ap­pear to have been in­suf­fi­cient, as they fo­cused ex­clu­sive­ly on bol­ster­ing the de­vel­op­ment pipeline with­out re­mov­ing the block­age cre­at­ed by is­sues with pay­ment,” Ver­ma con­ced­ed.

To rem­e­dy the ex­ist­ing set of “mis­aligned in­cen­tives,” the CMS has fi­nal­ized new rules to re­form an­tibi­ot­ic pay­ments from 2020.

Un­der the cur­rent sys­tem, hos­pi­tals bun­dle to­geth­er the costs of all the ser­vices for a giv­en di­ag­no­sis in­to what is called a di­ag­no­sis-re­lat­ed group (DRG). Con­gress im­ple­ment­ed the DRG sys­tem in 1983 to con­trol hos­pi­tal re­im­burse­ments by re­plac­ing ret­ro­spec­tive pay­ments with prospec­tive pay­ments for hos­pi­tal charges. The CMS as­signs each DRG a weight, which in con­junc­tion with hos­pi­tal-spe­cif­ic da­ta, is used to de­ter­mine re­im­burse­ment.

This sys­tem tends to in­cen­tivize hos­pi­tals to pre­scribe cheap­er, gener­ic an­tibi­otics that are not en­gi­neered to tack­le drug-re­sis­tant in­fec­tions. “This, cou­pled with the com­par­a­tive­ly low­er rev­enue ceil­ing for an­tibi­otics due to their low pre­scrip­tion vol­umes, has caused new an­tibi­otics to be­come en­dan­gered in­no­va­tions,” she wrote.

CMS is, there­fore, chang­ing the sever­i­ty lev­el des­ig­na­tion from non-CC to CC for codes spec­i­fy­ing AMR — the “CC” des­ig­na­tion in­di­cates the pres­ence of a com­pli­ca­tion or co­mor­bid­i­ty in a giv­en in­pa­tient case that re­quires the hos­pi­tal to ded­i­cate more re­sources for the care of that pa­tient than typ­i­cal­ly re­quired for the spe­cif­ic di­ag­no­sis. Clas­si­fy­ing drug re­sis­tance in this way will com­pel high­er pay­ments to hos­pi­tals treat­ing pa­tients with AMR, craft­ing a path­way for doc­tors to pre­scribe ap­pro­pri­ate new an­tibi­otics with­out dis­rupt­ing hos­pi­tal bud­gets. CMS will al­so con­tin­ue to “ex­plore whether ad­di­tion­al re­forms are need­ed to re­cal­i­brate DRGs to bet­ter ac­count for the clin­i­cal com­plex­i­ty of drug re­sis­tance,” Ver­ma said.

An­oth­er mea­sure be­ing tak­en by the CMS is to amend the New Tech­nol­o­gy Add-On Pay­ments (NTAPs) sys­tem as it re­lates to AMR, which is “unique­ly di­min­ished for an­tibi­otics.” NTAP was cre­at­ed in 2000 as a “time-lim­it­ed en­hanced pay­ment for new drugs or de­vices” to smooth the en­try for fresh prod­ucts while pro­vid­ing time for the rel­e­vant DRG to re­cal­i­brate to ac­com­mo­date pay­ment for new prod­ucts. “How­ev­er, stake­hold­er feed­back near­ly two decades lat­er sug­gests that im­ple­men­ta­tion of the NTAP through rule­mak­ing by CMS — both in terms of el­i­gi­bil­i­ty cri­te­ria and pay­ment — is in­suf­fi­cient to sup­port in­no­va­tion for an­tibi­otics,” Ver­ma ac­knowl­edged.

This is part­ly due to the fact that an­tibi­ot­ic de­vel­op­ers strug­gle to meet the agency’s “sub­stan­tial clin­i­cal im­prove­ment” cri­te­ria as they are tra­di­tion­al­ly giv­en the green light by the FDA on the ba­sis of tri­als that show their prod­ucts are non-in­fe­ri­or to ex­ist­ing an­tibi­otics. “(H)alf of pre­vi­ous an­tibi­ot­ic ap­pli­ca­tions for NTAPs have been re­ject­ed be­cause of a fail­ure to sat­is­fy this spe­cif­ic cri­te­ri­on,” Ver­ma said.

An­oth­er is­sue is that the pay­ment lev­el for the NTAP is set at 50% of ei­ther the cost of the new prod­uct or the dif­fer­ence be­tween the DRG pay­ment and the to­tal cov­ered cost of the par­tic­u­lar case. How­ev­er, this thresh­old is in­suf­fi­cient to in­cen­tivize hos­pi­tals to file for an NTAP pay­ment due to the low an­tibi­ot­ic pre­scrip­tion vol­umes for re­sis­tant in­fec­tions.

To rem­e­dy these struc­tur­al chal­lenges, the CMS — the Unit­ed States’ largest pay­er — has fi­nal­ized an al­ter­na­tive NTAP path­way that does not in­clude the SCI cri­te­ria and in­creas­es the NTAP from 75% from 50% for new an­tibi­otics that have been grant­ed as Qual­i­fied In­fec­tious Dis­ease Prod­uct (QIDP) sta­tus.

Last year, for­mer FDA com­mis­sion­er Scott Got­tlieb sug­gest­ed a “li­cens­ing mod­el” in which acute care in­sti­tu­tions that pre­scribe an­timi­cro­bial med­i­cines would pay a fixed li­cens­ing fee for ac­cess to these drugs, grant­i­ng them the right to use a cer­tain num­ber of an­nu­al dos­es.

Mi­no­ryx and Sper­o­genix ink an ex­clu­sive li­cense agree­ment to de­vel­op and com­mer­cial­ize lerigli­ta­zone in Chi­na

September 23, 2020 – Hong Kong, Beijing, Shanghai (China) and Mataró, Barcelona (Spain)  

Minoryx will receive an upfront and milestone payments of up to $78 million, as well as double digit royalties on annual net sales 

Sperogenix will receive exclusive rights to develop and commercialize leriglitazone for the treatment of X-linked adrenoleukodystrophy (X-ALD), a rare life-threatening neurological condition

Vas Narasimhan (AP Images)

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FDA commissioner Stephen Hahn at the White House (AP Images)

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Secretary of health and human services Alex Azar speaking in the Rose Garden at the White House (Photo: AFP)

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Gene Wang, Immetas co-founder and CEO (file photo)

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President Donald Trump (via AP Images)

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